Retail bankruptcies aren’t the only numbers approaching recession-era levels.
With store closures topping 6,000 for the year, the number of announced job cuts in retail has passed 60,000, according to research from outplacement firm Challenger, Gray & Christmas. The year’s retail job losses have already surpassed all other years but one since 2009, and 2017 is barely half over.
Most of the losses have come from the department store and apparel sectors, as well as other niche retailers. Macy’s alone has let go of 10,000 people, and J.C. Penney has laid off another 5,000, according to Challenger.
The losses could continue as more companies fall by the wayside and others take a more cautious approach to their store footprint. Retailers, meanwhile, will have to figure out how to make their remaining stores — and with them their remaining store associates — as productive as possible. That could mean equipping them with technology; giving them more time, power and incentive to boost store sales; or just asking them to do more with less (something many economists will tell you isn't possible).
And then there’s e-commerce, commonly accused of being the leading cause of the retrenchment in retail. But some research suggests that e-commerce is creating jobs far faster than brick-and-mortar retail is shedding them.
As stores go, so go jobs
It’s not just bankrupt retailers closing stores and shrinking or freezing their footprints and laying off workers.
"In terms of store network downsizing, I think retailers are being much smarter and more proactive now than they were last year, not only on store closures but also on the upfront side, with how much new store build they’re doing," Pete Madden, a director with consulting firm AlixPartners, said. "Because of all the Chapter 11s, I think there’s an acknowledgement that no retailer is immune from what’s going on right now. Instead of looking at already-struggling stores, retailers are being proactive about projecting a store’s [profit and loss] out over the next three years and being realistic about: Does that store need to be around?"
"That is a good thing overall for retailers, but it doesn’t help job growth," he added.
At the same time, the list of companies cutting their corporate staffing is also long, and growing. Among them are Sears — with more than 500 layoffs this year — Dick’s, Walmart, Lowe’s, Hudson Bay, Abercrombie & Fitch, American Apparel and more.
"On the corporate side, some of that is just a reaction to the current business environment," Madden said. "If your [comparable store sales] are down 5% to 10% year after year, you have to take an action. The question is if that’s deep enough — if online continues to accelerate and comps continue to go down at that rate."
The various rounds of layoffs and corporate struggles have freed up some talent that better-off retailers might look to attract. "There are good people on the market today, whether they’re at struggling retailers today and are actively looking to leave, or in some cases they were part of a Chapter 11 and now they’re available," Madden said. "For retailers doing well, it’s a buyer’s market."
A job-creation era for retail?
As for the thousands of store employees set adrift amid the much-hyped “retail apocalypse," it’s difficult to say what will become of them.
Michael Mandel, chief economic strategist for the left-of-center Progressive Policy Institute, said that some workers might end up elsewhere retail. He points out that overall retail job numbers have moved little this year. For example, the Labor Department’s full retail category — a vast catchall that includes, among other categories, gas station and auto parts store workers — fell by less than 7,000 workers between last May and May 2017.
But Mandel goes further, arguing that retail is actually creating jobs right now, if you count e-commerce. He’s been trying to do just that, looking county by county across the U.S. and counting new jobs in warehousing and other sectors likely to be devoted to e-commerce fulfillment and logistics. He’s found that e-commerce, by his count, has created 397,000 jobs over the past decade — more than five times the jobs lost in retail over the same period.
"We’re substituting paid labor for unpaid hours that households use to put into shopping. Paying fulfillment center workers to wander around the fulfillment center and pick out the stuff, and paying truck drivers to drive back and forth. So what’s happening is we’re actually creating a lot of jobs rather than destroying them."
Michael Mandel
Chief Economic Strategist, Progressive Policy Institute
"Here what’s happening is we’re substituting paid labor for unpaid hours that households used to put into shopping," Mandel told Retail Dive. "It used to be you would get in your car and drive to the mall or the big box store, and you would wander around for a couple hours looking for stuff, and then you’d stand in line, and you would retrieve your car from the enormous parking lot, and you would drive home. And it would take, oh, three or four hours.
"We’re now paying people to do those tasks for you. Paying fulfillment center workers to wander around the fulfillment center and pick out the stuff, and paying truck drivers to drive back and forth. So what’s happening is we’re actually creating a lot of jobs rather than destroying them."
Trying to do more with less
For those workers left in brick-and-mortar at apparel and other retail stores, their jobs will likely change in part as a result of how the current retrenchment plays out.
AlixPartners' Madden said that retailers who are getting leaner to compete with online players will have to wring out more productivity from their current stores, and hence their employees.
"When you look at how to actually get productivity gains, you start asking more from those store associates," he said. "And the type of requests that retailers are making now and will be making going forward are around flexible labor — in terms of what shifts are they willing to work — and what are the roles in the store, whether it’s at the front end or maybe they’re going to help for ship-from-store fulfillment. But that all plays into productivity, and I think that will continue to grow — just asking more out of the roles of associates."
Meanwhile, automation is likely to, at the very least, change the tasks store associates are assigned. That could add to productivity as well, but it could also wipe out many retail jobs as machines and algorithms take over some of the menial retail tasks such as running a cash register and stocking shelves.
A report from Citigroup and the Oxford Martin School found that retail is especially at risk of losing employment through automation — as much as 66% of the field on the high side, according to the study. A Forrester study from last year projected that 6% of retail jobs could be gone by 2021 as they become automated. Yet another, more recent study put the figure at 7.5 million retail jobs in the coming years.
But so far technology has not eaten noticeably into retail jobs. "Automation within retail stores, while possible, has not strongly manifested itself yet," Michael Rieley, an economist with the Bureau of Labor Statistics, told Retail Dive in an email. "Self-checkout technology has been around for many years, but retail salespersons have continued to see employment growth."
Shop clerks of the future
Some think that store associates will become freed — through technology, as well as smaller store footprints and inventories — to devote themselves more to customer service.
"In order to compete with online retailers ... brick-and-mortar stores are likely to focus more on customer service, as interpersonal interaction remains an advantage that in-store retail has over e-commerce," the BLS' Rieley said. "This in turn could lead to more demand for retail salespersons at the remaining retail stores."
Zeynep Ton, an associate professor of operations management at MIT who teaches a course on retail labor strategy, thinks that for retailers to survive at all, they will have to empower their employees to be more productive. In fact, she argues that retailers’ lack of attention to the roles of store employees has in part led to the current sales stumbles across the industry.
"Mediocrity was OK for a long time when people had a lot of money to spend and competition wasn’t as intense. All those companies that operated in mediocrity, that gave customers no reason to come to their stores… now they’re going to disappear."
Zeynep Ton
Associate Professor, Operations Management, MIT
"I think that mediocrity was OK for a long time when people had a lot of money to spend and competition wasn’t as intense,” she said. “All those companies that operated in mediocrity, that gave customers no reason to come to their stores… now they’re going to disappear.
"If you visit these retailers, you won’t be surprised, because their stores are dirty, their merchandise is out of stock, there are lots of problems… Why on earth would I go to a department store and wait to see people who aren’t knowledgeable about the products, to get bad service, when I can just go online."
More specifically, Ton said that corporate decisions like loading up stores with endless product variety and promotional activity — with all the signage and product rearrangement that comes with it — and pushing poorly paid employees to manage it all makes it nearly impossible for them to provide top-notch customer service.
The retailers Ton says are better poised to weather the sales downturn are those that empower their employees to make frontline decisions and help improve company processes, among other things. While some companies — such as Costco and the convenience store and gas retailer QuikTrip — use such a model with notable success, it goes against decades of industry practice.
"Retailers are so focused on minimizing labor costs," she said. "They want to get more work done with fewer people. It makes for bad jobs for employees and bad service for customers."
